Yesterday was a wonderful day for trading, as the market signaled a daily short-sell set-up and the intraday action unfolded beautifully with pure price swings and clear resistance/support levels.

Rather than muddy up a chart, I thought I would indicate the pure action using the 15-minute chart with nothing but price and moving averages. Moving averages are not magical – when they work, it is because other traders were watching them and sentiment shifted when the market reached these levels.

Nevertheless, using moving averages in a trending environment can give pure price entry/exit signals as well as define your risk (stop loss placement) to a very small and acceptable level as compared to the possible reward of the trade.

This is a 15 minute chart of the DIA – Dow Jones ETF. With the exception of the choppy counter-rally from 10:00am until noon, the price smoothly trended with few ‘hiccups’ along the way – something many traders wait a long time to see but rarely do with consistency.

Another point I am making is that simple ideas, rather than complex technical analysis, can work just as easily with less effort and mental anguish (or confusion, particularly if technical indicators are conflicting at times).